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Afterpay has partnered with pharmacist Rite Aid, making it the first drugstore in the US to offer buy now, pay later (BNPL) services.
Last week, Afterpay announced that online customers of Rite Aid will soon be able to pay for goods in four instalments at no additional cost, as long as payments are made on time.
Late payments are subject to a fee of up to $8, or no more than 25 percent of the order value at the time of purchase, according to Afterpay’s terms of engagement.
In a press release, Afterpay said the partnership marks the first time that BNPL services will be available to US shoppers for purchasing everyday items such as groceries, toiletries, babycare and beauty products.
Zahir Khoja, general manager of global platforms and partnerships at Afterpay, said the firm’s expansion into drugstore e-commerce comes at a time of increased demand for BNPL services.
According to a Coresight Research report sponsored by Afterpay and published in April, consumers in the US and Canada are increasingly taking measures to adapt to rising inflation, including using BNPL.
Based on a survey of 500 consumers, Coresight found that more than half (53 percent) said they have changed their spending habits to protect themselves from inflation.
The most common measures include purchasing cheaper alternatives to everyday essentials, purchasing selected brands only during sales, and comparing prices across shopping channels and retailers. These measures were cited by more than 50 percent of respondents.
Of the third of consumers in the survey who said they were either regular or occasional users of BNPL, 39 percent said they had increased their use of this payment method due to the impact of COVID-19 and rising inflation.
When asked about their future budgeting plans, 51 percent said they expect to either maintain or increase their use of BNPL over the next year, while only 8 percent said they will cut down on BNPL.
Around 20 percent of non-BNPL users also said they expect to use it for the first time this year.
BNPL, everyday items and problem debt
The findings led Coresight to conclude that brands and retailers should “factory reset” their understanding of consumers in light of inflation and the pandemic.
“The past two years have considerably changed shopping habits. Adding to it, inflationary pressure is set to alter the already reshaped habits,” the report notes.
“However, the general theme that we observe in our analysis of the survey results is that of value seeking — buying better products at attractive prices.”
Alongside new promotional and pricing strategies, Coresight emphasised that brands and retailers should explore new payment methods and new ways to reward shoppers.
However, the rise of BNPL on the back of inflation and economic distress has not been without its critics, and will likely lead to increased scrutiny from regulators.
In March, US-based personal finance company Credit Karma released a report warning that high inflation, high levels of credit card use and BNPL could lead to excessive indebtedness among consumers.
Based on a survey of 1,028 of US consumers, Credit Karma found that 53 percent of people who have used BNPL say they did so out of necessity, and 45 percent of all respondents said they are more likely to use BNPL when their finances are tight.
Nearly 60 percent of respondents said that inflation makes them more likely to use BNPL.
Against this backdrop, Credit Karma warned that BNPL may be fueling a cycle of debt for some consumers.
“I’ve always said BNPL services are a great tool for consumers who wish to spread their payments out over time,” said Colleen McCreary, consumer financial advocate at Credit Karma at the time.
“However, like any loan product, it can be a dangerous path for those who do not borrow responsibly."
As reported by VIXIO in February, similar growth in BNPL has been observed in the UK, including BNPL for purchasing everyday items.
Echoing Credit Karma’s McCreary, UK consumer protection organisations have warned that use of BNPL for everyday items is a sign of excessive personal indebtedness.
“A common indicator of problem debt is a client borrowing to pay for essentials like food, so parts of the industry now promoting buy now, pay later credit for grocery shopping is worrying,” said Richard Lane, director of external affairs at UK debt advisor StepChange.
